Friday, February 1, 2008
New S.F. condo project will be a rarity in 2008
San Francisco Business Times - by J.K. Dineen

Jackson Pacific is set to begin construction this week on One Hawthorne St., a 165-unit building likely to be one of the few new condo projects to begin rising from downtown San Francisco this year.

The 24-story building, which will cost $150 million to build, is a joint venture with San Francisco-based MacFarlane Partners.

Ezra Mersey, the former Tishman Speyer managing director who founded Jackson Pacific in 2003, said any hesitancy to jump into the treacherous housing market is outweighed by the project's prime location near the corner of Howard and Second streets.

"We're looking beyond the present cycle and creating a unique project -- with the best location, exceptional contemporary design and very strong sponsorship," said Mersey.

Amalgamated Bank, a labor union pension fund, provided the $120 million construction loan along with the Bank of America. Webcor is the contractor . . . .

The terms of the construction loan were hammered out in September, and Joseph said it would be nearly impossible to duplicate it in the current credit environment. In addition, the involvement of the deep-pocketed MacFarlane Partners and the experienced Webcor went a long way toward assuaging lenders' fears.

"A lot of banks are licking their wounds right now and they are not interested in more speculative development," said Joseph.

While MacFarlane Partners is one of the biggest urban real estate investors in the country, with $20 billion under management, One Hawthorne is its first San Francisco project. MacFarlane Partners' Bay Area projects include the Crossing in San Bruno, Bay Street in Emeryville and Uptown in Oakland. Company founder Victor MacFarlane lives in a penthouse at the St. Regis in San Francisco.

One Hawthorne will include an unusually diverse selection of floor plates ranging from 550-square-foot "junior one bed-room" units to 2,200-square-foot three-bedroom condos. Pricing will range from $500,000 to about $3 million for 2,200-square-foot penthouses. Mersey said he wants to cater to an eclectic mix of buyers, including families who he predicts will be increasingly drawn downtown.

"Families live in downtown Paris and New York," he said, "so why wouldn't they live in a world-class city like San Francisco?"

Mersey concedes that the national housing market "may get worse before it gets better," but he calls San Francisco the "most land-constrained and supply-constrained market in the United States."

"The excesses were far less here and the recovery will be much better," he said.

The project will be an important milestone for Jackson Pacific. The firm made a major bet on downtown and Rincon Hill in 2003, during the dot-com downturn, snapping up three sites: 45 Lansing St., 340 Fremont St., and One Hawthorne St, which Mersey said was a "failed dot-com and no one else wanted it." Mersey's company took each project through the city's time-consuming and politically charged approval process. All three were approved in 2006.

Since that time, more than $2 billion has been invested within five blocks of One Hawthorne, with developments ranging from the $460 million Westfield San Francisco Centre and the $350 million Millennium Tower to the $300 million office tower at 555 Mission St.

"The amount of investment near the site is staggering," said Mersey.

The building will consist of a masonry podium and a curtain wall tower broken into two sections. Mersey, a former architect who worked with the celebrated Philip Johnson, designed the building with EHDD.

...That's kind of a nice old building to be coming down, though. For some reason, I thought this was the parking lot at 2nd and Howard.

The parking lot at 2nd and Howard would be 219 Second Street, where I believe there is another proposed tower of similar height to One Hawthorne. It will be interesting to see how these two towers will relate as near neighbors.

The parking lot at 2nd and Howard would be 219 Second Street, where I believe there is another proposed tower of similar height to One Hawthorne. It will be interesting to see how these two towers will relate as near neighbors.

Plus there will be the other (shorter) Transbay tower; 524 Howard; and eventually the last Foundry Square building all in the next block to the east. This whole stretch of Howard will look very different in a few years.

More than a few, I fear. Most of these projects date from the late 90's dot-com daze. Many of them have been through the cycle office-->condo-->office-->condo and now, according to the BizTimes, back to office perhaps. And that's just as many are predicting a national decline in commercial real estate (REIT shares, often predictive, are now selling for 70% of the value of the real estate they hold, suggesting a decline in the value of that real estate of nearly that magnitude) to match the one in residential we've already seen. Frankly, I can't understand why the developers don't try to anticipate that a project started now won't be ready for occupancy for 2 years or so by which time the residential market should be solidly in recovery (and office may be still struggling). But perhaps it's just that they'd like to build but can't get money--that's what BizTimes suggested.

Anyway, I don't think a lot of those proposed projects in and around 2nd & Howard will get off the drawing boards any time soon.

The building being surrounded by the barrier appears to be the site--so it would have to be demolished. Like I said, to my eye it's nicer than some buildings on Van Ness that got designated as architecturally "significant" so I'm surprised they would let them demolish it in SF. Check the Mapquest link above for the exact location but you are right that it's about midway between 2nd and 3rd, almost opposite where New Montgomery joins Howard.

Like I said, to my eye it's nicer than some buildings on Van Ness that got designated as architecturally "significant" so I'm surprised they would let them demolish it in SF.

It may have to do with its date of construction. The buildings on Van Ness were amongst the first of their kind in San Francisco. This one might just have been designed to look older than it really is.

PBuchman and I discussed this project back in early December in the SF Rundown thread (including a near-identical shot to the one from socketsite). At that time there was some question about the transfer of development rights. I guess that's been settled.

This should be a more interesting demo than say 375 Fremont, as they'll have much less room to maneuver.

Actually, I might be confusing 219 Second St. with 222 Second St. across Second St. 222 Second St. is another tower proposal at around 350' and 25 stories tall (shortened from 436' and 32 stories?). That makes 3 new towers in a row along Howard Street around Second Street. I believe that the tallest of the 3, 222 Second St., is in the middle of this row, with One Hawthorne to the west, and 219 Second St. to the east, if I'm not mistaken.

Actually, I might be confusing 219 Second St. with 222 Second St. across Second St. 222 Second St. is another tower proposal at around 350' and 25 stories tall (shortened from 436' and 32 stories?). That makes 3 new towers in a row along Howard Street around Second Street. I believe that the tallest of the 3, 222 Second St., is in the middle of this row, with One Hawthorne to the west, and 219 Second St. to the east, if I'm not mistaken.

i don't believe 219 second st is happening anytime soon. last i heard there were conflicts with the proposal and the planned tunnel that will serve the new transbay terminal. has there been any movement on this site?

I'm pretty sure 222 Second is the larger parking lot (on the southwest corner) at Second and Howard. There's also a very small parking lot that Zip Car uses on the southeast corner. Is that 219? There is nothing but car parking going on at either of those locations at the moment.

I'm pretty sure 222 Second is the larger parking lot (on the southwest corner) at Second and Howard. There's also a very small parking lot that Zip Car uses on the southeast corner. Is that 219? There is nothing but car parking going on at either of those locations at the moment.

The small parking lot is actually 201. 219 has to be the old brick building that sits at the corner of Second and Tehama (across Tehama from Cnet, which is 235). It is currently being renovated inside. So what's this 219 Second St. project you guys are talking about? Is it supposed to replace the old brick building? If so, I would consider that a shame. It's a great looking little building.

Perhaps "someday" would have been a better word choice. But One Hawthorne is underway. 222 Second is supposed to be LEED Gold and thus get fast-track approvals. But as you said, getting construction financed may be a problem. 524 Howard is probably in the same boat. Then there is the Transbay lot a little further west on Howard. I was thinking that had a good chance since it will also help fund the new terminal. But selling development rights and starting construction can be many years apart.

The permit for using the street for demo purposes is good through the end of April, so that should give us an idea of how long it will take to clear the site. Also, the little garage that used to be next door along Hawthorne is already gone. You can just make it out to the far right in this photo from December:

Also, the little garage that used to be next door along Hawthorne is already gone.

Here's the photographic evidence:

Thrilling shot, isn't it?

I double checked the addresses on Second. Here's the stretch where 219 would have to be:

The building on the left is marked 215. Next to that is the brick building I mentioned. You can see the green covering and scaffolding on the right side of it. It is being remodeled inside. To the right of that is the Cnet building, which is 235. So 219 either has to be an alternative number for 215 or the brick building. If one of them is going to be torn down someday, I sure hope it's the one on the left.

^^^I recall that in the late dot-com days around 1999, there definitely were plans to put an office building on that corner where the small parking lot is and I'd bet they included the little gray building with "Chatz Coffee" you pictured ("215").

The building on the left is marked 215. Next to that is the brick building I mentioned. You can see the green covering and scaffolding on the right side of it. It is being remodeled inside. To the right of that is the Cnet building, which is 235. So 219 either has to be an alternative number for 215 or the brick building. If one of them is going to be torn down someday, I sure hope it's the one on the left.

Today, I noticed that they've added a street number to the brick building: 217. So now I'm even more confused. Maybe it used to be 219 and they re-numbered it.